The economics of kidney transplantations

Have you ever found yourself wondering whether economists and their theories are any good to society? Nobel Laureate Alvin Elliot Roth and several of his colleagues were particularly successful as they made one of the most unquestionable contributions to the real world. As a part of their aim to fix some of the market failures, they studied a “market” of kidney donations. It is not a typical market as it is illegal to sell one’s organs and therefore money and price have no allocation power. Therefore, even though everyone has one extra kidney which he or she can live without, there is no matching mechanism which would bring together supply and demand for kidneys. To make the problem even more complicated, once a man in need of a kidney finds a relative or a friend who would be willing to become his donor, it is quite likely that their blood types do not match and thus the transplantation is not possible.

Having the problem analyzed, Roth suggested to create a centralized authority that keeps track of those who would be willing to help someone by donating his or her kidney. Having such a database, it became easier to find pairs of patients and potential donors for whom the blood type fits. Hence, it has rapidly increased the likelihood of a successful donation and consequently transplantation. Moreover, they also proposed a new matching algorithm for kids to find a public school in big cities or to allocate medics into hospitals. All of these interventions are meant to fix market failures and increase efficiency of the particular market and most of them have a significant positive impact on day-to-day life of thousands of people.

Reference: Roth, A. E. (2008). What have we learned from market design?. The Economic Journal, 118(527), 285-310. Available here.